Ways to Increase Your Vacation’s Rental Daily Rate

As a vacation rental owner, you’ll come across many key performance indicators that are vital to property management. These KPIs represent the success of a company and help business owners make informed and strategic decisions. 

Whether you want to focus on revenue management, competitive benchmarking, or occupancy trends, using KPIs will lead to much more accurate results.

What Is the Average Daily Rate?

The Average Daily Rate is one of the top KPIs to measure the operating performance of your vacation rental. So, why is it important and what can you do with this information?

Knowing the ADR (Average Daily Rent) of your vacation home can help you come across major flaws in your business plan and maximize your revenue.

It allows you to compare your rates across longer periods of time, analyze key trends, and see how well your competitors are doing. It’s no secret that there are a lot of operational costs when it comes to managing a vacation rental.

If you strive to increase your bookings you need to keep up with the contemporary and up-to-day amenities, offerings, and visual experiences that many guests will look forward to.

Due to the booming advancement of travel trends, you must follow up with new and exciting ways that will increase your bookings. In order to do so, you need to consistently improve multiple aspects of your business.

How to Calculate Your Average Daily Rate

Calculating your ADR is a breeze! Just divide the total revenue that is earned by the rooms occupied on a given day by the total number of rooms occupied. 

Let’s take a look at an example. Say you have rented out 25 rooms, bringing in $4000. To get the ADR, you’d have to divide $4000 / 25. The ADR would therefore be $160.

Keep in mind that you’re dividing by the total number of rooms occupied, not the total number of rooms. This is a common mistake that leads to inaccurate results.

How to Increase Your Average Daily Rate

It’s no secret that there are a lot of operational costs when it comes to managing a vacation rental. With expenses racking up, increasing your revenue (and therefore increasing your average daily rate) is the best way to balance out the costs. 

That said, there is no single best way to increase your average daily rate. In order to do so, you need to consistently improve multiple aspects of your business.

Here are 3 ways to increase your average daily rate and drive your vacation rental to success:

image source: Anna Nekrashevich

1. Get Your Pricing Right

Price plays a big role in your average daily rate. If your prices are too high for your target, you won’t attract enough guests. If it’s too low, you’ll probably get more bookings but your profit and average daily rate won’t be ideal.

Finding the right price for your vacation rental can be a tricky process, if you don’t know what factors to consider.

Start by analyzing your expenses, your competitor’s prices, and occupancy rates throughout different seasons. Consider using dynamic pricing, an algorithm that helps to optimize your rates and increase profit.

2. Improve Guest Experience

In a study done by Chris Anderson, a professor at Cornell University, he concludes that hotels can increase their price by 11.2% (while maintaining the same occupancy), by doing one simple thing: raising their review score by just of 1 points!

image source: cottonbro

Enhancing guest experience can be done in many ways such as improving communication. Offering useful information and amenities, preparing a welcome basket, or providing a unique and personalized vacation rental experience.

The happier your guests, the more likely they are to return in the future, and recommend you to their friends and family.

The result? More bookings and a higher average daily rate!

3. Start Upselling Services

Upselling is a sales technique that encourages guests to pay extra for services that can improve their overall experience.

It might come as a surprise but many guests are more than willing to pay for the following:

  • Early check-ins or late check-outs
  • Airport pick-up or transportation during their stay
  • Luggage storage
  • A birthday or anniversary basket
  • Local tours
  • Grocery delivery
  • etc.

Brainstorm what services you could upsell for your specific business. Depending on where’s your location and what your target market is interested in.

What to watch out for

Average daily rates don’t include rooms occupied by staff, vacant rooms, complimentary rooms, or canceled bookings. Therefore, while calculating it is extremely useful for managing your property, it’s also important to keep an eye on other KPIs such as revenue per available room (RevPAR) and occupancy rates to get the full picture.

Keep a clear record of your actions, make sure that nothing slips out of your fingers and gets forgotten. It might take time and effort to implement the above tips and get desirable results.

There is a lot of things you need to do when you wish to increase your vacation rental booking; so start now and start diligently.

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